Two secrets to estimating digital communications ROI

Digital marketing has always been a paradox. It is two things simultaneously: Extremely expensive and nearly free. It is pricey because the skills needed to stage digital campaigns and “collateral” are still rare compared to those needed to stage traditional media efforts. And it’s free because once you’ve published the material, every incremental interaction costs a fraction of a cent. So how in the world do you estimate a digital return on investment (ROI)?

Here are two trade secrets. In honor of the fast-approaching close of the summer vacation season, I’m going to use a road trip as a metaphor.

1.) Focus attention on the speed of your progress and not on whatever city is currently outside your window.

Web metrics are notoriously untrustworthy. They may be off by 11.5%, or -18%, but of one thing you can be sure: They are never exactly correct. Living with this imperfection requires both a diligent focus on precision and a resignation to the medium’s inevitable “slop.”

The solution is to chart metrics over time, using the last period as a benchmark for this one. A saving grace of web metrics is that as imperfect as they are, they’re always imperfect in perfectly identical ways, month after month (assuming nothing technically has changed).

2.) Remember the cost of the car as you calculate what you’ve spent.

Break the costs of your trip into two: Fixed and variable. With the car trip metaphor, you need to remember that part of your costs are sunk into an asset. Whereas the gas, oil and accelerated depreciation come from the variability of the trip, the expense of the car itself is fixed — something you would have to pay even if you left the car at home.

In the same way, every communication is a contribution to the maintenance of a crucial intellectual property: Your brand. Whether you did nothing this month to burnish that brand, it is still an asset — a source of wealth. (Consider this: You can’t sell a vacation you’ve just had, but you can sell the car you took it in!).

You spent dearly in the past to get your brand where it is today, and you should acknowledge that every investment in communication that mentions the brand is like the replacement of a radiator hose or car battery. It helps retain the brand’s value.

Don E. Schultz and Jeffrey S. Walters, in their book Measuring Brand Communication ROI, used a different metaphor. They compared a brand to a physical property (instead of the intellectual property that it actually is). Should you stop spending every year on its upkeep, it will begin to crumble, and will eventually fall to the ground. In digital marketing efforts, this spending is a portion of every PPC campaign, every email blast, every social media initiative.

What fraction of your digital spending should be put toward the “car” and not the “gas and oil?” That’s the subject of another day. But simply shifting to this paradigm is progress.

Take these two tips to heart and you’ll be well on your way to reporting reliable ROI.

Are you in the Milwaukee area? Then you can learn more when I speak at C2’s September Five Dollar Friday. On the afternoon of Friday, September 18, I will be a co-presenter there, as part of an exciting exploration of “crucial web acronyms: SEO, PPC, SEM,” and — ultimately — ROI!